Fair Notice on Fair Lending

Millions of Americans rely on loans and other credit products to attend college, buy cars, purchase homes, or open businesses. For many of us, access to credit makes it possible to achieve the American Dream of a better life for ourselves and our children. All too often, credit discrimination stands in the way of this access. It keeps worthy borrowers from the tools they need to reach their financial goals.

Credit discrimination is illegal. Under the Equal Credit Opportunity Act (ECOA), a creditor may not discriminate against you because of your race, color, religion, national origin, sex, marital status, or age (as long as you are old enough to enter into a contract). It is also against the law for a creditor to discriminate against you because you receive public assistance income, or because you exercise in good faith any of your rights under the Consumer Credit Protection Act.

Discrimination is not always obvious. A borrower may not realize that she has been the victim of intentional discrimination on the basis of her race or sex. Moreover, lending policies that seem evenhanded can be illegal if they have a disproportionate, negative effect on a group that is protected under ECOA, such as women or seniors. Lending practices that produce these adverse effects are said to have a “disparate impact.” They are unlawful unless they meet a legitimate business need that can’t be met by an alternative that has a less disparate impact. Discrimination that disparately impacts borrowers in violation of the law hurts consumers and can threaten the economic stability of our communities. That is why the law has long recognized this form of unlawful credit discrimination.

The Consumer Financial Protection Bureau is responsible for enforcing the Equal Credit Opportunity Act. The Office of Fair Lending and Equal Opportunity at the CFPB helps ensure that all Americans have fair, equitable, and nondiscriminatory access to credit, and we will use every tool at our disposal to protect American consumers.

Today we are giving fair notice on fair lending. We are letting both lenders and consumers know that in our examination and enforcement work, we will combat unlawful, discriminatory practices—including those that have an illegal disparate impact on protected borrowers. We will look not only at mortgage lending, but also at other types of credit including student loans, loans for cars, and credit cards.

Access to credit is critical to a successful financial future. At the CFPB, we are committed to fighting unlawful, discriminatory practices and creating a fair marketplace for all consumers.

Patrice Ficklin is the CFPB’s Assistant Director for the Office of Fair Lending and Equal Opportunity.